Overseas Growth to Send Airplane Lessors to New Heights

Anybody just focusing on domestic US traffic would miss how the rest of the world is seeing explosive growth in airplane traffic. For airplane lessors it's mostly about international growth and with Boeing (BA) continuing to struggle to get its new plane out it just makes the planes owned by lessors like AerCap (AER) and Genesis Lease (GLS) more valuable. Below are a couple of examples of the explosive growth seen outside the US and in places other then China and India.

LAN Airlines is one of the leading airlines in Latin America with a dominant position in Chile and Peru plus operations in Argentina and Ecuador. It reported a huge 11.9% increase in system traffic for September.

• System passenger traffic for September increased 11.9% as capacity rose 9.3%. As a result, the company's load factor increased 1.8 points to 78.8%. International passenger traffic accounted for approximately 71% of total passenger traffic.
• Domestic passenger traffic in Chile, Argentina, Peru and Ecuador rose 17.5% as capacity increased 15.0%. As a consequence, the domestic load factor for the month increased 1.6 points to 77.0%.
• International passenger traffic for September rose 9.8% as capacity increased 7.1%. Accordingly, the international passenger load factor for the month increased 1.9 points to 79.6%. International capacity was mainly driven by an increase in operations on routes to Europe and the South Pacific, partially offset by a decrease on certain regional routes.

Both Dubai and Abu Dhabi show strong growth as well. Dubai has shown more then 10% year-over-year growth the last three months. It also forecast a greater then 13% growth in 2010. Abu Dhabi is showing much slower growth, but still decent growth non the less.

• Dubai International Airport saw passenger traffic climb 10.7% in August, while cargo volumes edged up 2.9%, its operator Dubai Airports Co said on Monday.
• Traffic was slightly down on the 12.6% growth witnessed in July, but up from the 10.3% growth seen in June.
• Dubai airport has projected passenger traffic growth of 8% this year to 40.5 million, with growth rising to 13.6% in 2010.
• Abu Dhabi International Airport saw passenger traffic climb just 2.5% in August, a significant decline on the 10.3% growth recorded in July, its operator Abu Dhabi Airports Co. said on Sunday.

AER is in the process of buying GLS and the combined companies will be the largest independent airplane leasing company. Based on this growth in non-BRIC locations, it just shows the demand that exists for modern airplanes. With both Boeing and Airbus struggling to deliver new planes, these lessors will be alot more attractive. Considering both AER and GLS trade below $9 and forecast over $1.70 in earnings they are must buys.

Disclosure: Long AER, GLS, and BA

Comments

[optionsgirl:]

Good article. I picked up GLS when the market was close to its lows, and have never looked back. I'm happy with the 400%+ gain and like the business model very much. The proposed sale of GLS to AerCap seems like a good match to me.
This one's a keeper.

Oct 10 11:35 AM

[User 129873:]

AYR (Aircastle) appears to be another lessor airplane lessor of value. Any others of less prominence?

Oct 10 12:44 PM

[Stone Fox C...:]

FLY is another one to check out. AER is the best value, but FLY has a nice dividend that some investors want.

Oct 12 07:17 PM